money plan: buy 2 or 3 bedroom house. Rent house to Maggots who save 1 of the bedrooms for your fanny heat when it's in town.Quote:
Originally Posted by slippy
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money plan: buy 2 or 3 bedroom house. Rent house to Maggots who save 1 of the bedrooms for your fanny heat when it's in town.Quote:
Originally Posted by slippy
Immigration haters - this is why the Bronx stopped burning:
http://www.nytimes.com/2006/09/10/re...ef=keymagazine
Still enjoying a little boom out here in BFE tied to the price of gold. Just had my house appraised today for a home equity loan to stick it to my credit card company.....house went from purchase price of 95,000 (appraisal value) in Feb 2005 to 138,000 as of yesterday! W00t! Definately not super huge gain, but FKNA 43k in almost 2 years is fine with me.
..damn good rate! I somehow got 4.25 with 20% down and minimal credit but unfortunately I adjust in 2 years. It looks like I'll have outgrown my condo by then and a little sweat equity should help my resale be at least level cus things are definatly down in my area. It seems like trying to seriously time the market with your main residence is pretty risky and difficult.Quote:
Originally Posted by rideit
We have gone from $239 to $459 in four years...
Housing is an investment, just like buying a stock in the stock market.
There are bull markets and bear markets. It's possible to lose money in bull markets, and make money in bear markets, but it's a lot more difficult than swimming with the tide.
There are factors that affect only a local market (such as development policies, existing housing stock, local employment picture, and trendiness of a town or neighborhood) and factors that affect the nationwide market (such as interest rates and inflation).
Right now the national factors, which have been strongly positive over the previous ten years (declining interest rates, low inflation, strong economy) have become less positive. Interest rates are rising, inflation is increasing, and salaries are not keeping pace. However, there are still places where local factors are enough to overcome this.
How bad will the national factors get, and will the local positive factors overcome them? I don't have that answer.
I haven't followed this thread at all but here's a little data for it:
Foreclosures Up 53% over Aug 05 and 24% over July 06
Wow.
Mass foreclosed-home auction in Michigan
Homeowners in so-called 'auto-wreck' states have trouble keeping up with payments; region leads nation in foreclosures.
By Les Christie, CNNMoney.com staff writer
September 12 2006
NEW YORK (CNNMoney.com) -- More than 250 bank-owned single-family homes, condos and duplexes in Michigan are going to hit the auction block en masse in late September, according to Hudson & Marshall, the company handling the auction.
http://www.hudsonandmarshall.com/auc...&auctionID=303
spats speaks the truth. But for those of you who think RE will never go down b/c "they're not making any more land" (might be the stupidest argument I've heard since "Why wear a condom? I'm never going back to Haiti!"), check out this chart from Yale economist Robert Schiller (you know, the guy who was ringing the alarm bells about the tech bubble in the late 90s):
http://graphics10.nytimes.com/images...aph2.large.gif
Edit: Why is it all messed up? The image I linked from is clear as a bell.
Its like anything else, stocks, whatever. People try to sell you on the idea that you will make some historical average return. Its probably true, but they dont tell you about the volatility inbetween, losing your job etc.. whatever.
add gold and oil stocks to the heap of sucker plays this year.
Procrastination has been a solid play for me again this year.
I have a problem with this chart. This chart should start post 1920, because mass-production is a unique event that changed the market for good. Prior to mass-production, the house was worth multiple times more than the land it was built on. Post mass-production, such has not been the case. Land was hardly a function of the market prior to 1920. People weren't moving to the suburbs because there was no room in the city. It looks like 1890 was arbitrarily chosen as a start date because it "works" with Schiller's theory. …and how can you look at a jump that's 5 times bigger than any other jump before it and say it's going to correct like the smaller ones did?
If we look at the period where the index has generally stayed around 100 it's only from 1950 to 1996. That's not a long time. To me, it's an insufficient sample size.
The only way the index returns to 100 is if they start mass-producing land. Haven't seen any talks of that happening. It's that or the major businesses and universities in big cities start moving to South Dakota or we start building supertrains. As the price of oil goes up, there's no way most people can expect to commute more than an hour each way. In 25 years there won't be any place to build a house within an hour of a city center.
Except on reclaimed dumps and waterways...manufactured land, in essence. San Francisco and NYC are good examples of manufacturing land as well.Quote:
Originally Posted by shmerham
The Japanese have excelled at it building entire airports on reclaimed landQuote:
Originally Posted by rideit
http://web-japan.org/stat/stats/images/ecn64.gif
cripey, look to Holland and Venice for fine, fine examples. New Orleans, on the other hand....not working out so well.
More like claimed land.Quote:
Originally Posted by cj001f
For a genuine, full fledged real estate crapout, you need job losses. This has not happened yet. The loss of buying power, as a result of the higher rates, has effected "certain mkts".
When I bought my house in the Bay area, I had a 6.625% morgatge. When I sold it, i had just refied down to 4.625%. Assuming the loan was for 80% of the house value, the added buying power was almost exactly what i sold it for.
Without massive layoffs, or a recession, a big dump is unlikey.
Bozeman is already outbuilding the demand: supposedly the town has 3x the inventory than the amount of interested buyers. (But the amount of interested buyers has not gone down.) Happened a lot quicker than I (and everyone else) thought. Things are changin'.
Cue end of Iraq war and the return of thousands of soliders, all looking for work.Quote:
Originally Posted by Cono Este
Well, it is about time we get our shit together with the MagLev trains...Quote:
Originally Posted by shmerham
In any case, we are definitely not running out of land. We'll either form new cities (see Vegas, Las) or just increase the density of the ones that we already live in.
End?Quote:
Originally Posted by DJSapp
Whaaa?
They can either stay, and work for the energy industry, or come home, and work in Wyoming.....for haliburton.
Yeah, I know, probably not the end of shrub's term. I'm just being an optimist on the sidelines waiting for the bottom to fall out so I can scoop up my first home for next to nothing. Do be ready for the post-war recession, it will come.Quote:
Originally Posted by rideit
Re: Postwar recession.
It's different this time.. 160k soldiers is not that many for the workforce to absorb and Military pay is really pretty good. Most of the soldiers will come back flush with cash:
http://usmilitary.about.com/library/...enlbasepay.htm
I'd argue that an end to major involvement in the Iraq war would be a plus for the economy overall.
You're misunderstanding the chart. The index shouldn't be expect to return all the way to 100. That would imply that real estate provides no return on an inflation adjusted basis. This certainly isn't true for most areas. Rather, what he's trying to illustrate is that real estate, over the long-term, produces a an average rate of return of X (whatever the number is). As you can clearly see if you draw a trend line through the first 105 years of data, this rate of return has been dramatically exceeded since the late 90's. A regression to the mean trend would likely bring the index down to about 125 or so, about 37.5% less than mean home values today.Quote:
Originally Posted by shmerham
Do I believe we will in fact regress all the way to that mean nationwide? Probably not. But it goes to show you how expensive housing is now compared to very long term trends and that there is substantial room to fall before reaching the historical market equilibrium. Schiller "chose" 1890 b/c that's when the reliable data set begins.
That, and just because the war is (or will be) over doesn't mean the soldiers are out of a job. That's not how it works.
holy shit! Flush with Cash!? jeezuz, where do we start? Well, how about the highly marketable skills that these guys are bringing back from the desert. Yup, Wall Street needs Humvee drivers. And they'll probably find that the plant down the street their fathers worked at is long gone to China. But, hey, no problem, most of these guys have Ivy league pedigree and MBAs, so they'll really drive up the real estate market with their newly found professional positions.Quote:
Originally Posted by 4matic
Now, you're supposing that there's going to be a quick end to this conflict and everything will be peachy keen back here in God's land, but that may be news to even Rumsfeld. We just built a fortress for an embassy in Baghdad that makes Hussein's palace look like a vacation cottage, digging in for a very long haul. And, more important than anything, as every day goes by, this "war" drives our deficit higher by the millions. With that will eventually come higher interest rates, and then, well, you know, look it up, somebody had to pay for our little party in Vietnam. The economy of the 70's was just wonderful for the returning soldiers then. Yeah, they were all flush with cash and rode Caddies down easy street.
half a million personnel is a rounding error in our labor market. WWII we had 6 million plus personnel and a much smaller labor market.Quote:
Originally Posted by DJSapp
edit: 4matic beat me to it. Benny, our deficit went down and the amount taken in by the tax man went up.
It's not just the returning soliders, it's the slowdown and possible layoffs in the defense manufacturing industry. There's a lot of internal support keeping those 160k troops going. Even then, it's turning a little drop into a big drop in the bucket, but it could effect smaller markets with a disproportinal number of troops returning.Quote:
Originally Posted by mr_gyptian
Ah, fuckit. I will still need 80k to make my down payment. Thanks for killing my hopes of affordible housing.
I did a college economics paper in 1974 on the Vietnam post war recession (yes, I am that old..). That recession was influenced by hyperinflation due to rising energy prices which were a much higher % of the economy back then. Gasoline prices were up 500% over a 3 year period. Plus, the dollar and gold were floated which caused termoil in banking throught the 70's.Quote:
Originally Posted by Benny Profane
Relative to 1970 Millitary pay is up quite a bit and remember that in 1970 it was a conscription army. The draft wasn't eliminated till 1973 (lucky me)
big week coming up:
On Tuesday, the Commerce Department will report on housing starts and building permits for August. On Monday, the National Association of Home Builders will release its housing market index, a sentiment survey of builders.
"The situation in the housing market is precarious," said Brian Bethune and Nigel Gault, economist for Global Insight. "Emotions could start to play a greater role in builders' decisions, adding downside risk to the numbers."
Economists surveyed by MarketWatch expect housing starts to fall 2.5% in August to a seasonally adjusted annual rate of 1.748 million from 1.795 million in July.
Starts have fallen in five of the past six months to a level that's off about 21% from the peak in January.
"Demand and supply conditions have been deteriorating rapidly," said Jay Feldman, an economist for Credit Suisse.
New home sales are off 22% from the peak, while the inventory of unsold new homes is up 22% in the past year.
Not surprisingly, prices are flat and probably down significantly considering all the extras builders are throwing in for free to sweeten the deal.
"Home builders are reluctant to begin new projects and are reacting to an increase in cancellations," said Drew Matus, an economist for Lehman Bros. Lehman economists expect starts to fall 13% this year and 14% next.
"Speculators, who drove the market for new homes over the past few years, have now fled," Matus said.
A record 1.73 million homes are vacant and awaiting a buyer.
Interesting data frm Comstock funds
http://www.comstockfunds.com/index.c...menugroup=Home
The Hard Landing For Housing is Already Here
September 14, 2006
The market is suddenly assuming that since energy prices are declining and mortgage rates are drifting down, consumer spending will pick up and the housing industry decline will end. In our view this outcome is highly unlikely. Our negative outlook for consumer spending is based far more on the end of the housing boom than it is on high oil prices. In turn, it is now evident that housing is already undergoing a hard landing that can’t be cured by a downturn in mortgage rates, and that the situation is likely to worsen. Here are some facts to consider.
32.6% of new mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000
43% of first-time home buyers in 2005 put no money down.
15.2% of 2005 home buyers owe at least 10% more than their home is worth.
10% of all home owners have no equity in their homes
$2.7 trillion in loans will adjust to higher rates in 2006 and 2007.
70% of borrowers who took out pay-option ARMS in the past year have loan balances larger than their initial loan.
Ø
Homeowners face higher payments as mortgages are reset. Generally, monthly payments rise between $200 and $500 depending on the size of the mortgage.
Ø
According to Reality Trac, August foreclosures were up 23% over July and 53% over a year ago.
Ø
The number of homes for sale is at record highs, and inventories are 59% higher than a year earlier.
New home sales are down 22% and existing home sales down 11%.Ø
The NASB housing market index has recorded an all-time decline.
Ø
The housing affordability index is at a 15-year low.
Ø
The house price-to-income (rents) ratio is off the charts. According to HSBC, in 18 states accounting for over 40% of national home values, the price-to-income ratio is 3.6 standard deviations above the mean.Ø
The OFHEO index of house prices deflated by the consumption price deflator has soared to a record high of 350 from 250 in 2001. From 1976 to 1996 it never was above 220.
Ø
According to the NAR the year-to year prices of existing homes are now flat. A short time ago they were rising at a yearly rate of 16%.
Ø
Nationally, home prices have not declined on a year-to-year basis since 1933. Recently, however, prices have been dropping in the North East, West and Mid-West.
Ø
Sales incentives are now estimated at 3% to 7% of selling prices.
I just got my house I have yet to close on appraised.99thousand askin price.125 thousand appraisal value.Crash?? not in my neck o woods.The old omage of location,location,bla,bla.Good resort property near a snowbelt out west probably will do nothing but appreciate.Thats all its been doin for 15 years plus.But Detroit thats a world away from unknown Idaho.
Nice mantra.Quote:
Originally Posted by powwow/asap
Good luck with that.
The real problem lies in the word "resort"
In order for your values to hold, you need yuppies believing in the economy and continuing to buy 2nd homes.
If they ever lose faith in the second home market and their jobs and the economy, lookout below.
Personally, I think you are fine for now, but never say "never"
okay, I'm not going to read through the previous seven pages which totally makes me a dick. But, I'm lazy and it's time for bed.
my theory:
More and more businesses are encouraging employees to work from home. The very idea of an office environment is changing as workers are able to complete all of their tasks from their kitchen, while employers don't have to pay for office space.
A side effect of this is that more people want to live in desirable locations, and less want to live everywhere else. I mean, if you're company was in cleveland, but you could work for them and live in Aspen...wouldn't you? So, property values in less desirable (aka places that suck) locations are dropping while at the same time property values are skyrocketing in nice places.
I live in Nothern NM, and it's absurd how expensive things are. We've definately seen a slight decrease in home prices, but mostly just in the homes over $600,000...houses less than $300k sell before they're even finished being built.
it's not widely published outside of the financial world, but some intersting stats from this week:
Homebuilder Confidence index plunges to 15 year low
Building permits fall to 4 year low
Housing Starts fall to 3+ year low
the hurt is coming...
I presume you are pointing to this theory as evidence that there won't be a housing crash in those desirable places. That they are somehow "different". I point to several pieces of information which put the lie to that theory. First, this housing boom hasn't been about people moving en masse to the more desirable places to live. In fact, some of the most frothy housing markets have been in notorious shit boxes such as Sacramento, Bakersfield, and Fresno. Clearly, no one is moving there b/c they'd rather not live in Cleveland. Second, even the notion that those desirable places are somehow special is faulty to begin with. Many people would consider LA and NYC desirable places to live. Each city sees wave after wave of college grads and other young professionals moving in to try and make their fortune there each year. Yet, in just the last 20 years, both have experienced deep recessions in their housing markets, with reductions in home prices of 20-40%, and even more in some places.Quote:
Originally Posted by ANON-505
Or look at Tokyo. It is the center of the Japanese universe. Anyone who wants to make it in Japan moves to Tokyo, as it is the political, financial, business, and cultural capital of Japan. And furthermore, they're not exactly dealing with a lot of open space in Japan either - a country with 110 million people the size of Montana. Yet real estate values there are currently 60-80% lower than they were during the big bubble of the late 80s and early 90s. Chew on that for a little while, then consider what drove that bubble - easy credit and lax or ill-advised lending standards. When you consider that a majority of mortgages in the hotter housing markets (California, PHX, Vegas, Florida, etc...) are interest-only or Option ARMs (lax lending), and that the US is just now emerging from the lowest interest rates seen in generations (easy credit), you begin to wonder what lies ahead. I'm not forecasting a Japanese style crash. But please don't trot out the "it's different here/this time" claptrap b/c it's not, and a lot of people are going to get hurt really badly. 2006 is just the beginning.
^^ I agree with much of this.
I've been thinking about what qualifies as 'lax lending'. Lenders wouldn't do it if it wasn't profitable, so perhaps it's not that relaxed? I certainly think margins are shrinking in the lending business, but for the larger houses (Lehman bros, DBank, et al.) there's still a spread.
Is the constant demand for bonds to hedge foreign exposure to the dollar keeping the rate market too attractive for the lenders?
Just pondering the nerdier banking side of things... who knows.
I'm not sure I understand the first half of your post. It is most definitely profitable for everyone in the lending value chain to keep things as is - realtors, appraisers, mortgage brokers, and lenders. They all get a cut when there is a transaction. With home values increasingly out of whack with median net income, the industry has had to use increasingly ingenious, and risky, ways of shoe-horning people into houses they really can't afford.Quote:
Originally Posted by mitch buchannon
The apex of this trend is the increasing prevalence of I/O and Option ARM mortgages. They are great for everyone named above. For the realtors and appraisers, they enable the transaction to get done in the first place - otherwise the monthly payments would be too large (more onthis later). The mortgage brokers and lenders are doubly happy b/c the former gets a fatter commission for these types of products, while the latter happily pays this fatter commission b/c of the juicy margins these loans generate. And what do the lenders care about the loan anyway? They almost inevitably turn around and securitize this loan, along with a bunch of others, and sell them off to some hedge fund or insurance company.
The problem with all this is as follows - Traditionally (meaning, in all of US history prior to five years ago), people with $40,000-$50,000 household incomes wouldn't be eligible to take out $400,000-$500,000 mortages. Even at 5% interest, that's $20-25K per year in interest payments. Normally, you'd want your interest payments to represent only 1/4 of your gross income at most. In addition, as both a lender and a sane human being, you'd want to make a down payment of around 15-20% so as to immediately acquire some equity in the home and reduce the debt burden you are faced with. These days, 100% loan-to-value mortgages are quite common, even for people with lousy credit scores. When you combine this with the risky loans that will adjust dramatically upwards after a year or three, you've got a toxic recipe for the housing bubble blues. These loan products/trends are helping to drive this phenomenon b/c the borrowers focus only on the artificially low payments they need to make in the first 1-5 years and count on home price appreciation to bail them out of trouble when the ARM adjusts. There is a very good reason why these products have existed for decades but were, until recently, limited to only the very well off. Noting the general level of financial literacy in this country (we have a negative savings rate), one has to conclude that many people who sign up for these loans have no idea of what the consequences could be if the housing market flattens, let alone goes down.
4.65% today on the ten year note. Down 75 points in two months. I can see below 4% next year..
As far as the "nice places" theory goes, there is also the fact that a lot of the action in those place is investment. Rich people buying second and third properties instead of putting it in the market because real estate offered better returns and you can even get a week or two ski vacation out of it and rent it out when you're not there. When that stops they will dump the properties like they dumped stock at the end of the dot com bubble. Money will just go to where it will make the most for its master.